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tv   On the Move  Bloomberg  October 27, 2014 4:00am-5:01am EDT

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is the biggest loser. name the banks failed the stress test. capital shortfalls and will speak to the ceo of one of the field lenders, giuseppe castagna , that is in two minutes time. that is what we are looking cap. futures pointing much higher on the back of those stress tests. if you look at the open, equities and a london open 0.1% higher. cac a full a full -- 1% higher. friday's closeis was so waiting for that. despite the big banking fail where are wes,? up of 0.3%. the ftse trading right now. the cac up. --ill bring you the auburn
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other numbers. we are watching the banks of this morning after the ecb cut the stress test results. here are 2 of the things they need to raise capital. bank with oneal billion euros and the other is carige. we are waiting for a price as they come through and we will flash at the bottom of the stream touchscreen. we are watching another bank. it is one of the nine things in the country that failed the stress test. we will bring the share price as it comes through. we are joined by the ceo, giuseppe castagna. great to have you here on at the show. i need a bit of your health. the ecb said you failed the stress tests. they said you have a capital gap of 66 million euros in the bank of italy said, it is a surplus. which is it? >> hi, good morning. thank you for your question.
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things needny other to clarify -- i think many of other banks need to clarify. at the same time when the ecb and different national authority and an outcast, the bank of italy. ecb wanted only to consider the result of 2013 and they do not take into consideration in their press release what many banks need in the first nine months of the year, as far as capital strategy. toour case, we were able have 700 million and we had another capital release of 800 that was years-- ago and the bank of italy released to us in june. into ourld some state
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asset management company. the comprehensive result of all of this was excessive capital of more than 700 million. making us one of the most capitalized banks in italy. you.ee with it is quite confusing to read on one side that you failed something on the side, very much cap allies. the ecb as saying you have a six under 80 for more efficient since under 84 million capital gap. $684 million capital gap. the excess number that you are talking about, are those extra measures you have included in the bank of italy, have they been accepted by the ecb or are
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we still waiting? >> thanks again. as far as we're concerned and in a mark oft is only communication, not a matter of accepting the measure these last nine months. bank of italy assisted the buture and we accepted them [indiscernible] decided to put an end to december 2013 and believe -- and leave the nca to copulate and consider the different measures -- to calculate and consider the different measures. it is not being accepted or not.
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december 2013, our pap er measured the bank of italy. it is adjusted. >> ok, let's talk about the italian banking sector in general. nine failed. about theit tell you state of the tight banking sector right now? -- italian banking sector right now? considerk we should many countries just like for instance greece or spain that there are ready going through a process a recapitalization and i was say merger during the last capital year. reacted to they
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ecb comprehensive of assessment only during these first months of 2013. realizing, our end. seven out of the nine banks, which did not pass the end of 2013, they already have in place measures that help them become pliant with the stress tests. i would say it's a matter of timing, of course. and it is important to understand, it is released and all of the banks, even a couple of others were compliant with the ecb and only to the stress test that we know they are very, very difficult to imagine. do wend these scenarios,
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have the banks that did pass. >> can you answer very quickly before we go to break, do you think the results of these tests will produce a wave of consolidation within italy and will banca populare di milano be part of the consolidation? >> i agree. everybody is thinking that it should be -- it could bring consolidation. we have much more fragmented and maybe it will be important to the country. we only have -- [indiscernible] we feel that it could happen. as you know i'm a italy is a very vehicle your banking -- peculiar with banking with banca populare di milano and it may add some problem. but i think something will the bankd of course,
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will play a bigger role. to buyeppe castagna, very much. the ceo of banca populare di milano. we will be back in two.. ♪
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>> i think the figures we have today, it is been a strong testing of the bank and we know where the weak spots, the remaining weak spots are so they
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can be dealt with. >> that was the dutch finance minister. in an exclusive interview with bloomberg on the ecb banking stress tests. we spoke with the ceo of when the banks that failed the assessment. now an investor's perspective. , great to have you here. incredibly busy. word, deflation. the fear of many people in this market. not a consideration of the ecb. how surprised are you buy that? it is clearly becoming more of an issue in the u.s. and i and they areqe likely to make some reference to inflation. this is a big issue. of course, deflation is important. we talk about growth in real
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terms. it isn't in a -- it is in real money. the police principal pradesh italy's visible problem -- ita principle problem is no real growth. >> the stress test, is a good enough you are only looking at adverse scenarios of 0.3% and when you ask the ecb's vice president why they do not look at deflation away with me for the bank, his response is, we do not do that because we do not expect to happen. is it good enough? >> everybody recognize on historic data and what we're trying to do is join to end up with a picture that we could collaborate with the evidence on the ground. the stress test was broadly good news. for companies like deutsche bank and commerce bank and not great news for companies like lloyd's.
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we'll have the bank of england's own stress test and i will be an issue. i do think want to look at europe and say, a lot of the really -- maybe unjustified. i look at the economic numbers, that of europe and they are not quite as bad. morning, with an equal amount of skepticism. over the past 12 months, the banks have taken it seriously. they have raised -- when we got? 60 billion euros. the banks took it seriously. beyond that, you look at the assessment, the nonperforming loans, it does not point to a very healthy banking sector, does it? >> no. greece last week, fully anticipated the good news today.
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and since would've not resolved numbers, although euro bank has clearly itself in the position where it is not to the very sears. some banks have profits. talkingsings, women about -- we have been talking about the short interest. some were bidding the share prices and they have a closing out. settles, there will be real winners and real losers. ing is a winner. i am backing -- there are great things in europe. controlling costs and building sales lines. in a debate the world, there will be i -- outright winners. tothe equity winners, talk me about lending. the ecb [indiscernible]
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when they identified an extra 103rd 2 billion euros in underperforming loans, how will it leads to -- >> no answer. >> i need your help. more ofve to see much robust language from the agenda to get economy is moving. itsee governments recognize, does not work. i would say that france would be the first big government to say we are going to have to spend more money and have to stretch the deficit because we do not get the economy moving. everything else simply goes in reverse. i think they will do that. it is insignificant recognition by the politicians that growth is a key issue. >> you need growth to boost lending. it will not pick up without -- >> up slowly. >> why they think the opposite
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up lies is beyond me. they want to expand the balance sheet by one trillion euros. today with this in the announcement of how much of that have the stress test. it's a pretty dire pick up. we look forward to december. can we expect a significant bigger pickup? do not think we can. we have to see a change in strategy whether they become much more focused on the road of generated -- on the real tools of generating and focusing on security has got to be in to thinking much more about corporate bonds and how you are releasing money into the economy. it has been highly successful in the bank of england. >> the corporate bonds, the top they could buy. they will have to make serious steps and that is one of the tools.
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if i were the ecb, i will be sitting down with sovereign governments of europe, and tell them, you hold the purse strings and would do whatever it takes for recovery. that's necessary is not sufficient. >> such a busy morning. james bevan. , a bigopulare di milano move lower. let's put it up. monti down at the open. commerzbank up much higher. up by 5.5%. banca monte down. commerzbank, some thought it would fail. it is up by over 5%. we will bring you up to speed. on the move is back in two.
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>> welcome back to "on the move ." i am jonathan ferro. we are going to toggle by ukraine. exit polls are showing -- president petro poroshenko's bloc looks to have won the most. ryan chilcote has the story. what is different about this new parliament?
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people think it is more the same but it is not. >> with the struggle result is the prime minister's party. of the striking results is the prime minister's party. just ahead of the prime minister's party. this is a man i'm a when i met him in march said he was going to be the most unpopular prime minister in ukraine's history on the back of the reforms he intended to implement. the money ukraine is getting from the imf. the voters appear to have a much himer view of him putting out front just ahead of the ukrainian president. perhaps part of the reason it all the reforms he promised has not been implemented. a number of the opposition parties government in the problem even after ukraine's ofolution stood in the way those reforms. perhaps not if you remains prime
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minister and that is an open question, we might see resistance was to the performance of the party, self-reliance from ukrainian into english, complete newcomers. none have actually served in the parliament. got 13%. you have a prime minister's party and president party aligned properly with the self-help party and gives them a solid majority and up road eu which is something they do not have going to the parliamentary elections. while there was a presidential election earlier in the year, these are the first parliamentary elections. the first time voters had a chance to say what they think about the new government since the revolution back in february. >> quickly, what is the significant, big changes to the parliament? >> effectively, what they are going to have to do right now is
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fix the economy. ukraine's economy is the worst performer in europe. the imf said it would fall as much as 10% this year. home to have ukraine as go worst-performing currency in the world. you have been not so small matter of heating. they do not have another gas was the only instead, they will sit down with the russians to see if they can get more. -- they do not have enough -- gas. -- on wednesday, they will sit down with the russians to see if they can get more. if percent you did not vote because they were in an area that is controlled by the russians like crimea or rebels. if there's going to be improvement in general, geopolitical backdrop, this government and this problem is going to have better relations with russia.
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ryan, thank you very much. i will bring in james bevan. parliamentary elections in ukraine, if it was a couple of months ago, it really could've moved to the market. are you surprised? >> absolutely not. the big issues remain. nothing is going to change. we are going to have this very significant standoff for extended period. >> large caliber weapons and reports. still fighting is going on. >> he believes he has the right to be engaged on ukraine's question. a huge, emotional issue for russia. not just, i want more territory and a better economy. it is not going to go away anytime soon. for russial issue and fundamental concern for you as an investor.
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is that no longer the big concern it was? >> i think the most markets have taken on the chin. what will the ifo be like? many think it will be miserable. i think that's a chance we get a small increase in october. we have pmi numbers that are slightly better. there were issues in timing. at the underlying numbers in germany, they're not really quite as bad as some suggest. the headline expectation came in at 100 and i think the market was very close. to you withoutlk talking about the uk retailer which has nothing to do with today's news. you told me that if cap coal fell --ow -- cap coal tepco fell below a certain number, it would be a buyer.
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>> tep will have to investc one billiono to be competitive. goy certainly do not want to [indiscernible] wheres the sort of level that have the risk appetite and you should begin to establish. >> does james have the risk appetite? know where it will go. i do think in a years time, the share price went up too quickly. >> he will let me know as soon as he buys. james bevan. quick check all european equities. it's all about banks and bank equities. banks higher. higher across the eurozone. dax is. this bank.is a move by over 10%.
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a lot of failures. we will talk to you more about the stress test in 2 minute's time. we are back in 2. ♪
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>> welcome back to "on the move ." i am jonathan ferro. into your trading day. how equities are trading. the ftse is up. up byx is pushing higher almost 89 points. the relief rally on the back of the stress test. not as bad as many people thought. the ecb traded the final line. i spoke to a few people today and it said it was comprehensive if incredible enough. the market will decide. comprehensive and credible
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enough. it encapsulates 49 banks. it is up by 0.5%. 4 are declining. , which i will come two. greek banks have not opened yet. that is alpha national and perea. every other bank, 41, are trading higher. no bank trading higher more than lender. is an austrian number three in the form your -- in the former communist bloc. the probe into the balance sheet of 130 banks for currency depreciation as funding squeeze, and eastern european was the stress test.
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this bank has been exposure to romania and hungary. it was a bit of a certain ahead of the stress tests. they are rising. a rise of relief. is theopulare di milano biggest black hole. down by 50% today. -- banca monte is the biggest black hole, down by 50% today. the moves are always bigger when the stock is always smaller. 2007. at 21 euros and the black hole, the capital hold that is italian lender has to fill. to citigroup to explore all of the strategic options as it considers how to replenish that capital hole. it is not a big stock of spotlight on italy today. you know what? the last time i looked, 4 banks
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falling,ut of 49 are not a bad return. >> not a bad return. when i look at banca monte and a short gap, is about 60% of the market cap. how do they raise this money? a lot suspicion it will be a wave of consolidation in the italian banking sector. mark barton, thank you very much. our top stories at bloomberg. the ecb will reveal how much they spent on corporate bonds last week. it will be the third time they have went to that market. according to traders, the ecb bought at least 8 billion from countries and the three days since the program began. the announcement will come at 3:30 p.m. local time. ukrainian voters have backed pro-european party in the country's commentary election.
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the supplementary election. -- parliamentary election. the prime ministers and presidents party have taken the majority of the vote. >> the results of the election bring the firm victory approach pro-forces and today gives us a lots of opportunity to develop and provide reform to strategy,e program of where we have the steps for the anticorruption and steps for [indiscernible] >> and brazil reelected is insident, dilma rousseff, the close election since 1945.
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brazil battles soaring inflation. investing in brasilia equities plunged the most in three years in tokyo after the incumbent's victor. she said she will like to be "a much better president in her second term." investors will be closely watching the markets open in brazil later. joining us now to walk us through the implications of the latest quote is ryan chilcote. just on the market side, short real? andhe stock market opens three hours and 25 minutes. it can fall by as much as 10%. in terms of hard data, [indiscernible] following the most since 2011 and that is down 6.8%.
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the invest exclusively in brasilia equities. the only thing that would mitigate the fall of when the market opens, it has been a good week since rousseff what that -- was anticipated as women. there was no margin. a lot of people will have seen this coming in a lot of the decline is already priced in. >> will we look at statistics and investors, is a bottom line she is not a reformer that aecio neves would have been? ordersey think her prior are in the wrong place. you have unemployment at record los, under 5%. let me take you through some of the indicators that have investor concern. inflation is as 6.75% despite the at that gold is at 4%. the economy entered a recession and the first half of the year and investment is at its every
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year low. as a portion of gdp, it stands as 16.5%, that is less than half of china. ais is confidence is at decade alone. moody's and s&p have indicated a credit rating of junk may not be far off. that has investors concerned. are under 52,000 points right now. that would be fair value. let's talk about a bid price. >> you have some analysts vets saying we could see a knee-jerk reaction. going to do is something and get rid of her finance minister and we learned she's going to appoint the new minister in a few days' time. that gives people hope there's more of an emphasis on ideas that are concerned about.
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bengals in european equities. let's bring it up. the dax is up by almost 1%. gains across much of the eurozone. still up 0.6 percent. ftse 100 up 0.5%. stress testthe results out yesterday. the biggest dan a loser right now is monte. look at that move, down. a capital shortfall. 50% of the existing marketing doubtful so where does the money come from? but a wave of consolidation in the italian banking sector. failed,lian banks plenty to discuss. we are back in 2. ♪
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>> welcome back. i am jonathan ferro. this is "on the move." the move.on novartis is selling its flu for $275usiness million.
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it will create the second-biggest market. it is pending regulatory approval but is expected to close in the second half of next year. set to be meeting. biebecker,cker -- relations between the board and sanof havei been strained for him trying to sell a drug or folio. shares have gained 100 50% under his leadership. vodafone set a began an audit into possible tax fraud as ono. they bought the spanish cable operator. vodafone is also reportedly withholding on mrs. 43 manager on three managers.
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offersceived takeover companies. salamander said they are in talks with both companies. move, do not wear read "the pulse -- do not worry, the pulse is coming up. andill talk about brazil italy. guests, of gets -- of concerned about the deflation story. the real story is does it make the banking unit viable? now that we have an apples for apples comparison, how does he feel about that devon the fed the german taxpayers are likely to be on the hook despite attempts to exclude taxpayers from this process.
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looking forward to that conversation. we'll have a pretty controversial character in italy. more importantly, what is happening in the banks. how do the at times square the circle? what kind of consolidation we have? >> the ecb has done a lot of due diligence for a lot of things. a lot of work being done. >> the ecb has done a lot of work. -- >> theyhave a have a bit of an issue with the adverse scenario. crooks you can understand his concern, he believes it does not increase deflation. 1% rater scenario has a for this year. tougher 2016, 0 .3%. maybe if you continue the trajectory a look at the five-year numbers as well, maybe
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we are not in there yet. >> when we talk about release -- a lot of people frontloaded. on the other side, the fact that was no need for capital rate. that is true. however, what you need to do then is look after the situation of how it is change versus 2013 when it announced -- you need to look at the undisturbed price as they were. m&a terms. you look at the amount of money being raised and issued and all of those kinds of things. however, we are where we are now and where we are now with and not a lot of credit growth. we will get that data tomorrow. we sell the eurozone looking very recessionary right now.
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we have all of that. we are still where we are now. >> what is fascinating when you list to the ecb officials and they talk about lending getting pumped up was to -- pumped up. prerequisite. you need to understand what some the balance sheets look like and have a clear understanding of how you gauge nonperforming loans. -- you are not going to kick start with one factor. this one of the factors. but there are clearly other factors that need to be resolved. that takes us back to the french budget and it how you budget and reform over those -- italian budget and reform over those two economies. we are sort of forward, but we knew that already. extra 136 billion euros of loans classified is not performed. >> what is interesting as well,
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when you look at the data points that the ecb has released, you can start with the judgment of with the bank will be when it is frontloaded. as a result of which, you take appoint a you can start to apply what you think will need to have to some of these institutions. investors will start putting these institutions under more pressure to raise capital. if you take the headlines, you really do not see the story here. you have to go into details. today is a devil in the details day. and do a little while look at the data. guy johnson, thank you. a quick check in the european equities. opening higher. the ftse down 0.1%. the banks are under pressure there. banca monte down by 15%.
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where does the money, from? -- come from? there it is. many people expected it could fail but, did not. you see rallies. with more. if you want to talk stress -- a lot of if you you question the credibility. i am on twitter at @ferrotv. ♪
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>> welcome back to "on the move ." i am jonathan ferro. let's bring you up to speed with companies on the move. toyota roles in the first nine months. revenue in the u.s. rose nearly 6%. the japanese auto giant sold 7.6 million cars and beating a volkswagen by only 200,000 vehicles. china.ide protest and they were disappointed in a recall. vw is calling him back more than 500,000 new vehicles. the company said it is possible thear end impact will cause axle to bend or break.
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how about this? steve ballmer could be in line for $1 billion in tax benefits after purchasing the los angeles clippers ask the ball team. for $2ht them and made billion and could claim half of the purchase price under a little-known tax code covering active owners of sports franchises. i apologize for the shouting of steve ballmer. back to our top story of the day. ecb bank stress test. we spoke to the chair and asked her about the results. have more work to do. we have seen a lot of information and all banks whether they passed or not. we have quite the information. that will help us to do a good job in challenging and making
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aspectsre are different and when you look at one of the criticisms of this test is it did not include deflation. were some of the outlooks too optimistic? >> i do not think so. i cannot give you a more precise response. [indiscernible] address,ho tried to the worst possible scenario as they were perceived at the time ien they would decide, believe we did targeting that did not materialize at all. of situation left as [indiscernible]
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there are elements that have been chosen. all in all, i think we are in good shape. on the stress tests, let's head out to frankfurt where hans nichols is standing by. talk to me about the mood in frankfurt. his sense of relief? relief affected the ecb is finally done with the process. 25 banks fail but only eight of those aren't deal in a failure. what i mean by that is there are a lot of technical failures. banks and that felt at the end of the year but the past nine months have raise enough capital to plug their shortfalls. we have eight things that need to cover some holes and averaged $6 billion, most of those are centered in italy. you mentioned germany. all of the german banks with one
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exception pass. one technical failure and they raised the funds. when we spoke to a board of waysnors, he said in some the german banks still have more work to do. buthe ones who just passed, on the german banks, they have to do much more work. competition is becoming much more international and fierce which means laying back and relaxing is not the attitude. ,iving the challenges we have as well as a low interest rates and the german market -- and the german mark is a challenge for banks and they need to do something about it. >> he said a big key for german banks is cutting into revenue. he also is critical of the failure to bake in the potential of deflation into the stress tests. overall, the stress test seems to be real risk, but they did
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not include russia. they did not include -- the estimate criticism. i've the banking index, stocks are done a little bit and we will see if it holds. chris hans nichols, thank you very much. let's call it what it is. the equities. the 55 minute relief rally, equities up by 2% after the opener. that was the session highs. it's now down by 0.5%. minutestake in a four time, will dated the german index. german confidence expected to slip again. european at those in general are opening higher. in general are opening higher. the ftse 100 up 01% in a little bit of reality. theitalian banking sector,
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worst performer and the eurozone stress tests. that's it for "on the move." if you want to talk marcus, you know where i am at. i am at @ferrotv. ♪
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>> not so stressed out. the ecb said only eight banks need to raise around 6 billion euros. >> consolidation in italy. reelected. brazil's president secures another election in the tightest election in recent memory. ♪ >> good morning. welcome. you are watchith
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